Tags: Goldman Sachs | Sergey Aleynikov | code | high-frequency trading

Goldman Code Theft Defense Rests After Calling Two Witnesses

Tuesday, 21 April 2015 02:52 PM

Sergey Aleynikov’s lawyer called only two witnesses in his defense against charges that the former Goldman Sachs Group Inc. programmer on trial stole the firm’s high- frequency trading code.

The jury in New York state court in Manhattan may begin deliberations as early as Wednesday after closing arguments. Aleynikov spent almost a year in prison for a federal conviction on the same charge. It was overturned on appeal.

Six months later, Manhattan District Attorney Cyrus Vance obtained a state grand jury indictment. Aleynikov’s lawyer has argued that downloading computer code in June 2009 as he left for another job, are a civil matter between him and Goldman Sachs and not a crime.

Defense attorney Kevin Marino called as one of his witnesses Teza Technologies LLC founder Mikhail “Misha” Malyshev, who hired Aleynikov away from Goldman in 2009.

Malyshev testified that he left Citadel LLC, the Chicago-based hedge fund founded by billionaire Ken Griffin, to build his own high-frequency firm because he “wanted to do something” on his own.

“We hoped to build the best company of that kind in the world,” said Malyshev, who also testified at Aleynikov’s federal trial.

He recruited Aleynikov for a job that would have paid him $1.2 million a year, at one point boosting his offer several hundred thousand dollars to meet the programmer’s demands, Malyshev said.

Not Interested

It wasn’t his intention to acquire another high-frequency trading firm’s software or its components, and such an acquisition wouldn’t have helped him anyway, he testified. Banks are typically not good at high-frequency trading because it’s a fast-paced business and they generally have “large monolithic systems” that don’t lend themselves to swift changes, he said.

Malyshev said he wouldn’t have taken Goldman Sachs’s high-frequency trading code if the company had offered it free. He would have fired Aleynikov if he had suggested he would bring the code to Teza for the system he was building, as it was a violation of company policy, Malyshev testified.

Under cross-examination by Assistant District Attorney Elizabeth Roper, Malyshev said that Aleynikov would have been the second-highest paid person at Teza, and that he was the only employee that he had offered to pay three times a former salary.

Malyshev acknowledged under Roper’s questioning that Citadel sued him and his deputy in 2009 over claims he violated a contract not to compete with the firm when setting up Teza. Citadel won a court order to temporarily block Malyshev and his deputy from working at the new business.

Recruitment Bar

A judge also barred the men from soliciting Citadel employees for 12 months and said she would fine Malyshev for erasing potential evidence from his computers after she had issued a document-preservation order.

Marino’s other witness was a Teza senior manager, Peter Friedman, who said Malyshev hired him to identify top talent for the new company, which he wanted to be the best high-frequency trading firm in the world. Friedman said he had spoken to another firm that recruited Aleynikov and identified him as a top talent with high-frequency trading and telecommunications skills.

Friedman said he didn’t suggest to Aleynikov that Malyshev or anyone at Teza wanted him to copy Goldman Sachs’s trading code to upload it to Teza computers. He would have stopped pursuing Aleynikov if he had offered to do so, Friedman testified.

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Sergey Aleynikov's lawyer called only two witnesses in his defense against charges that the former Goldman Sachs Group Inc. programmer on trial stole the firm's high- frequency trading code.
Goldman Sachs, Sergey Aleynikov, code, high-frequency trading
Tuesday, 21 April 2015 02:52 PM
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